As you can see, the derivative, national bonds, and money supply numbers are higher than before. As I said, things are much worse, not better. The opportunity for a worse crash (or major global credit contraction) in the future is higher than it was before QE1. Therefore QE2 will make the opportunity even greater, not less.

Even if half of the global derivatives collapse, it will be major. Even if half of the derivatives are formally written off in a reform package, it will be major. Even if half of the derivatives are considered by all global entities as worthless (no matter what the balance sheets say), it will be major. Extend and pretend has its limits, and there is no plan B.

The larger portions of this pyramid must contract, they are unsustainable debt. We have to mentally prepare for this. It will never be like the last 20 years again. The middle class will vanish.

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Austrian economist Ludwig von Mises (1881 – 1973)

Our government/Fed has clearly chosen not to “abandon further credit expansion” with QE1 and QE2 (and every other program the last 30 years). The current credit expansion will probably be limited to the primary banks creating derivatives and buying Treasuries (thus leaving the real economy out in the cold), but it is continued credit expansion on a massive scale none the less.

This pyramid shrinking is what the K-Wave Winter cycle is all about. There must be a correction to balance the last 55 years of credit expansion in the US. We have seen none of that global contraction overall, things have just moved around within the pyramid’s categories and overall it has expanded.

The gold and silver portion is always at the top, as it has no debt/liability attached to it to collapse. This why it is considered “insurance” in a Winter cycle.

– Third-Quarter GDP Growth Statistically Indistinguishable from Zero – Official Economic Activity Is Virtually Flat Other Than for Inventory Building (gg: aside from inventories, it was .6%, not the 2% reported. This is NOT good.)– Fed Will Be Forced to Monetize Treasury Debt, Irrespective of Current Jawboning, Games Playing and Hand Wringing – October Employment Data Likely Will Disappoint Market Expectations

This letter has Mr. Armstrong’s predictions for each currency (with charts) for the next 1-5 years, last several pages. He also covers the continuing currency and trade wars and how that will harm and eventually cause a collapse of fiat currencies in general, especially the USdollar.

Click here for an article about the major revision in potential Alaskan untapped oil supplies (assuming the oil companies can secured enough debt to get it out of the ground). It is a 90% revision down. That’s quite a revision.

But there is natural gas instead. That doesn’t help the national shipping infrastructure which economy is built on.

Side musing: Groovygirl is wondering if the government knew about this revision prior to the recent arms deal with Saudi Arabia? Groovygirl thought that arms deal was kind of weird and out of the blue, potentially causing more friction in the current Middle East political environment.

“In 6 months time, if we’re right, I think treasury yields are lower. Sub 2. 10-yr notes. I think the S&P could be sub 1000. Gold, look I think we may see the highs for gold in the next 3 months in this little cycle, 1500 maybe but beyond that, I think absent of a policy response, I think gold could fall.”

Groovygirl comments:

I note that about 6 months from now, we will hit Martin Armstrong’s date of June 13, 2011, where he is calling for a major change in Economic Confidence Model.

In Bob’s forecast, S&P at 1000 could be dollar driven or market driven or a combo. Lower Fed rates on the 10-year is a given if the Fed does QE2 from November until ? as they have announced.

I think QE, a 15% drop (which isn’t very much) in S&P, and low-interest rates, calls for higher gold, not lower gold. I think Jim’s prediction of $1650 is still not out of line, which isn’t that much off of Bob’s $1500. Groovygirl likes Martin’s date, will it take 6 months for people to realize that the new congress is as dumb as the old?

We will have to see how gold will react to Martin’s June 11, 2011 date.

Side musing: here is an excellent post with Greg Hunter, The Six-Million Dollar Problem. Everyone must understand this fraud.

Of course, the source and truth of these stories need to be verified, but the number and scope of new stories is alarming. It is causing groovygirl to conclude that major health risks for human and marine-life are being under-reported or, dare I say, covered up.

Again, I am warning those in the Gulf area to move immediately, if possible. If major health issues are occurring now, the long-term negative health effects are all but certain. If you must live in the area, protect yourself and your children as much as possible. Be informed and don’t sign anything that would exempt BP or anyone else from future liability. If anyone is trying to take your house, ask them to show you the original note, it will hold them off for a few months or more.

Groovygirl’s main concern is the banking and financial system. It is completely broken and the window for an orderly, controlled collapse is closing fast.

Absolutely nothing has changed. In fact, right now, there are more off-balance sheet shenanigans by banks and businesses, not less. More credit derivative swaps on mortgages and anything else available for a bet, not more. And the interconnectedness of global banking is further connected, not less. Mark my words, a repeat of the 2008 banking collapse will happen again, it is just a matter of time.

Groovygirl, personally, believes that this Winter Cycle will see 3 major collapses in the US. One was in 2008, which the Fed printed and covered. The next collapse, when it does happen, will cost 2-3 times more printed money and again no financial reforms will happen. And the last will completely break the US dollar, the Fed, and the US Empire, because they will not have the resources to keep from collapse as they used them all up on the previous two. This is a chaotic collapse.

The alternative at this point is a severe, controlled collapse that includes global debt haircuts and losses and major banking and financial reform on a global level. If the US doesn’t demand change, the world will not follow as a whole and therefore condemns everyone.

There is no political will in the foreseeable future for the alternative, so it will probably be the former. You must protect yourself and your investments as much as possible, the government doesn’t have your back.

Side musing: click here for a very interesting (and important) post from Harvey Organ about the gold and silver markets.

Some will attempt to dismiss what Mr. Chilton is saying here as inconclusive. Keep in mind that he is a high profile CFTC official, and what he says comes through a 50,000 watt megaphone, so he must choose his words with great care. But this is almost unprecedented for an official to speak out against his own administration.

The response to these sorts of revelations seem to be a blanket of media silence and whispered character assassination, which is the mark in trade of those who have no sense of duty, honor, and country. But the dominos are starting to fall, and more revelations are to come.

Update: JPM and HSBC are being sued for silver manipulation. Click here.